What’s the difference between business and economics?

Every year, as we go through the Options process (IGCSE and A Level), parents and students alike have hundreds of questions. And rightly so, the decision is important. But one question we hear multiple times every year is:

 "What's the difference between business and economics?"

...and more often than not, this question includes accounting. This post hopes to shed some light on this and help explain the main differences. 

At GIS, we like to use an analogy given to us a few years ago by another economics teacher (Mr Stewart...credit where credit is Stew!)… First, let's talk about Business Studies. Business studies delves into the core areas related to businesses and their operations. The buying, selling, producing and marketing of goods and services. 

Imagine a business, let's say it is a factory. Visualise lifting the roof off and peering inside; you see four main sections each with very different things going on...

In one area, there is a team of people using machines to busily produce a good that is intended for the consumers to buy. This is the Operations (or production) department of the business, they make the products. Next, we see the Finance department; a group of people paying bills and recording all the cash transactions and potential profits. They might be calculating how much is owed by the business to suppliers or maybe how much the firm needs to collect from its customers. In area three, managers are interviewing potential workers and others are working on strategies to train and motivate the existing workforce. This is the Human Resources department. Finally, we have a team of people producing plans about how to sell the product and make the consumer more aware through the use of the many forms of media and promotion - this is the Marketing department. All these departments are busily communicating and coordinating with each other being wary of the external influences impacting them. What is happening within is the subject of business studies. 

Now, pop the roof back on and zoom right out... that factory was just one small part of what we call the economy. Zooming out, you will see many different businesses, interconnecting and interacting with households and the government. This is the study of economics. Economics uses models and theories to analyse and understand how various activities might take place in order to allocate the scarce resources the economy has within it. These activities might be complicated by government policies, other economies and most importantly, the unpredictable nature of human behaviour. In simple terms, economics examines how we use limited resources to meet the unlimited needs and wants of society. It helps us understand how the economy works and how different factors such as government policies, global events, and consumer behaviour can impact the lives of those in the economy. Microeconomics looks at how individuals, firms and governments make decisions on consumption and production, often through markets and the forces of supply and demand. Macroeconomics  explores the ways economies can develop, how they trade with each other, and how a government might choose to intervene in an economy to stimulate growth, create jobs or control inflation.

Finally, Accounting…remember our factory? Well the area that had everyone working on financial matters such as paying bills, chasing payments and producing accounts to present to the bank or the board of directors, forms the focus of the accounting course. Accounting is the study of how businesses record and report their financial transactions, including topics such as bookkeeping, financial statements, and budgeting. It covers the principles, concepts, and techniques used in accounting and the interpretation of financial information. 

In conclusion, Economics, Business Studies, and Accounting are all valuable subjects that offer unique insights into different aspects of business and economics. They share some similarities but are different in their own right. It's important to think about your interests, what you enjoy and any career aspirations you may have when choosing your Options. All the subjects are stimulating, enjoyable and challenging  To find out more, check each of the subjects’ specifications for the exam board you will follow and make sure you talk to your teachers about how suitable each course might be for you.

At GIS, we follow the Cambridge International Examinations  board for all three, their website to all the syllabuses at IGCSE is here. We suggest not choosing more than two from accounting, business and economics to ensure you have a broad and balanced curriculum and to avoid specialising too early in your education.